Any explanation of how the world became rich needs to account for Britain's Industrial Revolution. Above all else, the major revolutionary change during the Industrial Revolution was an increase in the rate of innovation. The acceleration in innovation ensured that economic growth continued and did not peter out. New and important technologies emerged at a rapid pace in late 18th- and early 19th-century Britain.

But why did sustained technological change first occur when and where it did? Answering the question “How did the world become rich?” means establishing the reasons for both the location of modern economic growth and its timing. Any answer must account for how British society became particularly innovative. This is what we discuss in this chapter.

We first consider the British economy on the eve of the Industrial Revolution, paying particular attention to several important preconditions. These include the rise of a market-oriented society and its implications for labor supply and consumption patterns, the size of the domestic economy, commercial agriculture, relatively constrained political institutions, culture and social norms, and the increasing significance of the Atlantic economy. We dive at length into the literature of each of these factors in this chapter.

Many of these features were also shared by the Dutch Republic. But the Industrial Revolution did not begin in the Dutch Republic. We therefore turn our attention to factors that may have distinguished Britain from its rivals. These include its high level of state capacity and its dominant role in the transatlantic slave trade. While these factors played a role in Britain’s economic success, however, neither provides a full accounting of why this success led to industrialization. To answer the question "Why Britain?" we therefore focus on two important arguments. First, we consider Allen’s (2009) argument that innovation was a response to high wages and cheap capital and energy. Second, we consider Mokyr’s (2009, 2016) argument that cultural and intellectual developments within British and European society, along with increased human capital and skills, were responsible for Britain’s industrialization. We detail these arguments and discuss their relative strengths in this chapter.